The nuclear option

Michael Rencheck has a request. Peer into the future, asks the new CEO of Lynchburg-based Areva NP Inc. Demand for emission-free energy is growing. Envision the impact a new nuclear-components factory could have in Virginia.

Areva, an international supplier of nuclear equipment and services, is joining forces with Northrop Grumman Shipbuilding, the architect of the Navy’s nuclear-powered fleet, to build just such a plant in Newport News.

Groundbreaking on the $363 million project is scheduled for this month. In a year, more than 500 highly skilled workers are expected to begin making equipment to supply an anticipated global demand for new nuclear reactors. “We literally will make Virginia the leader in a revival of America’s nuclear-manufacturing capability,” promises the 47-year-old energy executive.

It seems like an improbable boast, but Rencheck may be on to something. America is undergoing a dramatic shift in regards to carbon emissions. Consequently, nuclear energy has regained its sex appeal after decades of being an ugly stepsister to coal and natural gas. Virginia is expected to remain a world supplier of pollution-emitting coal, but it’s also lining up the critical mass to become a serious player in a new nuclear market.

The Old Dominion already is home to the “nuclear Navy,” which long has relied on nuclear technology to power its leviathan submarines. Areva and its Lynchburg neighbor, nuclear-equipment maker Babcock & Wilcox Co., have an established presence here, and both companies are hiring in Virginia.

In fact, Babcock & Wilcox just announced plans to develop a scalable, modular nuclear reactor. The B&W mPower reactor would allow electrical utilities to add generation capacity in increments of 125 megawatts. The company plans to submit an application to the Nuclear Regulatory Commission (NRC) in 2011 for design certification of the reactor.
In response to the state’s growing demand for nuclear engineers, Virginia universities are pumping up their programs.

Not to be overlooked is Dominion Virginia Power, the state’s largest electric utility. It’s in line to possibly build one of the first new nuclear reactors in the U.S. in three decades.
Then there is the luck of geography: a site in rural Pittsylvania County potentially contains the nation’s largest undeveloped deposit of uranium, the element used for nuclear fuel. (See story on page 28.)
With those varied assets, might Virginia be uniquely positioned to become an end-to-end supplier to the nuclear market, including components, reactors, engineering prowess and — perhaps at some future date — even nuclear fuel?

Steve Walz, an adviser on energy policy to Virginia Gov. Timothy M. Kaine, isn’t prepared to be quite that bold. Still, Walz acknowledges Virginia’s rising profile in the sphere of nuclear technologies — influence that should increase if Dominion proceeds with its reactor plan. “We would [then] be in a leadership position to address cost and other issues associated with constructing new nuclear plants, since none have been built in the U.S. in a very long time,” says Walz.

Richmond-based Dominion Resources, parent of Dominion Virginia Power, is one of the largest energy producers in the country. It operates a total of seven nuclear reactors. The company has four reactors in Virginia: two at North Anna Power Station in Louisa County and two in Surry County. Together, they provide about 3,400 megawatts of power, or about 31 percent of the fuels Dominion uses to generate electricity here.

In November 2007, Dominion became the nation’s first investor-owned utility to apply for a combined construction and operating license from the federal NRC for a third reactor at North Anna. If approved, it would add an additional 1,600 megawatts to the state’s grid, enough to power 375,000 homes.

Dominion’s request is one of many the NRC is considering as the U.S., and indeed the world, strives to balance voracious energy consumption with concerns about protecting the environment. The federal agency already has granted Dominion an early site permit for North Anna 3. That means the company has a 20-year option to consider building a new unit at what is considered a suitable site.
Walz says nuclear power would help Virginia address two critical goals outlined in the state’s 10-year energy plan: increasing in-state generation of new electricity while curtailing harmful emissions. Getting approval to build a nuclear plant, however, is a long, arduous road. The earliest Dominion figures it could put a new unit into service is 2017-18 — 17 years after it began exploring the process back in 2000.

“If it happens sooner, hallelujah. But we’re not banking on it,” says David Hudgins, director of external relations for Old Dominion Electric Cooperative. The Richmond wholesale provider to 11 electricity cooperatives in Virginia, Maryland and Delaware is a minority owner in Dominion’s four nuclear reactors and would share in the cost of building and operating a new unit. That cost is yet to be determined, but new plants don’t come cheaply.

Times are changing
Thirty years have elapsed since a partial meltdown at Three Mile Island nuclear reactor in Pennsylvania. The incident, and an already waning nuclear industry, prompted a federal ban on new plants. Memories from that time mostly have faded, replaced by more pressing concerns of runaway costs and global warming. In a landmark decision in April, the U.S Environmental Protection Agency said greenhouse gases endanger health, paving the way for expected legislation on carbon caps.

Government financial incentives also are fueling renewed interest in nuclear energy. The National Energy Policy Act of 2005 made $18 billion in subsidies available to utility companies to help finance construction of new nuclear plants. Dominion is not among finalists being considered for loan guarantees by the federal Department of Energy (DOE), possibly because Dominion ended discussions with Wilmington, N.C.-based General Electric Hitachi about a possible reactor-component contract. The companies expected to split the money are the Southern Co. in Georgia, South Carolina’s Scana Corp., NRG Energy Inc. in New Jersey and Maryland-based Unistar Nuclear Energy.

Dominion originally had planned to use GE Hitachi’s ESBWR, which stands for economic simplified boiling water reactor design. However, Dominion and GE Hitachi could not agree on terms that enabled Dominion to build the new reactor affordably and within its construction timelines, say utility executives. Dominion halted negotiations with GE Hitachi and is taking competitive bids on technologies for the new reactor.

That move could cause a delay of more than two years in the approval process, says David A. Christian, CEO of Dominion Generation Inc. GE Hitachi might yet end up being the provider, notes Christian, after Dominion considers all bids.

There’s a lot riding on the decision. If Dominion selects another reactor vendor, that would end its participation in a 50-50 cost sharing agreement with the DOE to work through the licensing process. The cost for that alone — including the engineering to be ready for construction — is about $500 million. Dominion is part of a consortium of energy companies that is participating in the 50-50 arrangement. The combined cost for utilities is about $250 million, with Dominion’s share about $60 million.

Despite all the snags, Christian says it’s still possible Dominion could be among the first to build the next generation of nuclear reactors. That’s because Dominion built the North Anna facility to accommodate up to four reactors. Thus, it could have the ability to get a reactor up more efficiently than utilities that have to build from the ground up. But being first isn’t as important as “getting the best value for customers and shareholders” when inking a contract with reactor vendors, says Christian.

A decision on the bids is expected this summer, he adds, in hopes of hammering out a contract by year’s end. Rencheck says Areva plans to submit a bid. That raises an intriguing scenario: Might the two Virginia energy powerhouses collaborate on state-of-the-art reactor designs?

Areva has new reactors under construction in China, Finland and France (the home of its parent company). Dominion officials tell Virginia Business that some of its nuclear officers have traveled to these countries and visited nuclear facilities, including some of Areva’s new reactors. By the time Dominion expects to hear from the NRC on its permit, Rencheck says Areva will “have two plants in operation.” That might give Areva an edge since “we’re coming in with a bid based on real experience.”

Hurdles ahead
Meanwhile, the state’s energy needs continue to grow, although the recession has slowed demand. Between 2008 and 2015, the peak use of electricity in the Dominion territory is forecast to grow by 2,665 megawatts. So predicts PJM Interconnection, a Valley Forge, Pa.-based company that operates the electricity-supply grid for Virginia, 12 other states and Washington, D.C. That’s down from an earlier projection of 4,000 megawatts, (for the period of 2008-2018), a figure touted by Dominion in public relation efforts to gain support for new projects. However, the lower figure still represents a larger growth rate than the average for PJM’s region, says PJM spokesman Ray Dotter.

Virginia’s robust high-tech sector, with more than 30 power-hungry data centers in Northern Virginia, is largely responsible. “Think about what powers Virginia’s services economy: electricity,” says Hudgins. ODEC wants to help meet the shortage by building a distinctly non-nuclear facility — a controversial coal-fired plant in Surry County that would derive up to 3 percent of fuel from wood chips, otherwise known as “biomass.”

Dominion is pursuing all options. That includes building a 590-megawatt, $620 million station in Buckingham County that would be fired by natural gas. Another natural-gas unit in Warren County is in development. Dominion last year — amid controversy — got state approval to build a coal plant known as the Virginia City Hybrid Energy Center in Southwest Virginia’s Wise County. The $1.8 billion station raised the ire of environmentalists and citizens’ groups despite Dominion’s plan to generate up to 10 percent of its fuel from wood chips. The plant is going up on schedule and should open by summer 2012.

These huge capital projects are one reason Dominion Virginia Power is seeking a series of rate increases in Virginia, which would bump up consumer bills nearly 7 percent during the next year or so. That would follow an increase last year that averaged 18 percent for residential customers, which went to cover increased fuel costs. The latest proposal represents the first base rate increase in 17 years in Virginia. Dominion executives point out that, if granted, the company’s rates would still be more than 3 percent below the national average.

Clearly, a third reactor at North Anna remains a cornerstone of Dominion’s strategy. At nearly 1,600 megawatts, it would supply more than half of Virginia’s anticipated future electricity consumption. In 2007, the same year Dominion applied to the NRC, the Virginia General Assembly authorized an enhanced rate of return for new nuclear generation: twice that of a conventional generating plant, and equal to that of renewable sources.

Dominion officials repeatedly say a final decision has not been made on building a third reactor. Yet it’s hard to imagine how Dominion will boost capacity without it. If the company doesn’t proceed, what’s the fallback plan? Dominion isn’t really saying. “We’d have to do some studies and [show] them to state regulators for approval. But it probably means we’ll have to look at conventional fuels,” such as additional coal plants or suitable sites for combined-cycle plants that burn natural gas, says Christian.

Aside from federal licensing, a new reactor requires approval from regulators in Virginia and North Carolina. There are environmental hurdles, too. After hearing concerns from state officials and Lake Anna residents about using the lake to cool a possible third reactor, Dominion changed its design to include a cooling tower — with a price tag estimated at $200 million — removing the discharge of additional heated water to the lake.

The thermal impact on the lake from cooling existing reactors has been the subject of a lawsuit. North Carolina-based Blue Ridge Environmental Defense League last year sued Dominion, alleging the company violated the federal Clean Water Act because of the potentially adverse impact on Lake Anna as a result of discharging hot water from the nearby reactors. In February, Richmond Circuit Judge Margaret Spencer agreed, revoking Dominion’s state-issued water permit. Dominion says it is appealing the ruling.

When and if its new reactor comes on line, a third North Anna unit will have supporters. The Lake Anna Business Partnership, a group composed of about 100 local business owners, is eager for the 750 new permanent jobs and capital expenditures a third reactor would spawn. “We see it as a step forward, especially if energy prices continue to go up,” says Wayman Bishop, a former president of the group and one of its directors.

As Dominion and other power companies search for new sources of electricity, state schools are positioning themselves to offer skilled labor for an enhanced nuclear program. Virginia Commonwealth University in Richmond is the first state university to add a nuclear engineering track to its master’s in engineering degree, says Russ Jamison, the program’s dean. Dominion is helping to underwrite the 10-course program. Student interest is intense in Virginia Tech’s nuclear-engineering program, which was restarted in 2007. According to professor Mark Pierson, fall enrollment is approaching 100 students for a fundamentals of nuclear engineering course.

In Lynchburg, the Center for Advanced Engineering and Research won a $7.6 million grant earlier this year from the Virginia Tobacco Indemnification and Community Revitalization Commission to fund a nuclear-research center. The hope is that it one day will rank with Oak Ridge, Idaho and Sandia national laboratories, says Executive Director Bob Bailey.

Not everyone will be thrilled about the prospect of a nuclear comeback. Smart-grid programs are on the way, and power companies already offer customers green-energy options. Yet in the new world of energy, there’s no denying that nuclear is getting a serious second look